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Agricultural News

First-Half Results Reflect Tough Business Climate for U.S. Meat Exports

Thu, 06 Aug 2015 14:37:42 CDT

First-Half Results Reflect Tough Business Climate for U.S. Meat Exports June export data, released by USDA and compiled by the U.S. Meat Export Federation (USMEF), reflected a challenging first half of 2015 for U.S. pork, beef and lamb exports.

June pork exports totaled 174,554 metric tons (mt), down 4 percent from a year ago. With pork prices down significantly from last year's high levels, June export value fell 22 percent year-over-year to $454 million. For the first half of 2015, pork exports were down 5 percent in volume (1.09 million mt) and 16 percent in value ($2.88 billion).

Beef export volume in June was down 8 percent from a year ago to 96,716 mt, while export value fell 9 percent to $578.9 million. This was the second consecutive month that export value fell below last year's level, resulting in first-half value being steady with 2014's pace at $3.26 billion. First-half volume was down 10 percent to 527,109 mt.

"We were aware that exports would be facing obstacles in 2015, and that keeping pace with last year's record performance would be difficult," said Philip Seng, USMEF president and CEO. "The first-quarter slump was partially due to the West Coast port labor impasse, as well as intense competition from countries that continue to recognize opportunities in several markets. We were expecting to see a stronger rebound in the second quarter and that did not materialize."

Seng added that, while marketing budgets remain flat, competitors are beefing up efforts to capture larger shares of the red meat market. Competition continues to be a major factor, along with a strong U.S. dollar that is providing a price advantage for several competitors with slumping currencies. The European Union, for one, has been aggressive in targeting specific markets, and large supplies of European pork are making it into the coveted Asian market. This development is due in large part to the closure of Russia, traditionally the EU's largest pork export market. Russia's suspension of pork imports from the EU originally due to African swine fever but reinforced by a trade embargo related to the conflict in Ukraine has now lasted more than 18 months.

Australian beef production was expected to ramp down in 2015 as the industry entered herd-rebuilding mode after several years of poor grazing conditions. But with disappointing rainfall in Australia and attractive slaughter cattle prices, beef production and exports remained record-large through the first half of the year though some slowdown was seen in July.

Mexico, Korea were first-half bright spots for U.S. pork

June pork exports to Mexico were the largest since March, up 13 percent from a year ago to 62,112 mt. While first-half export value ($619.3 million, down 18 percent) reflected lower prices for hams and other cuts typically shipped to Mexico, export volume remained very strong (353,296 mt, up 6 percent).

Pork exports to South Korea moderated in June to 12,512 mt, up 55 percent from a year ago but the smallest volume since November 2014. June export value was $33.1 million, up 17 percent. Korea's first-half performance was stellar, with volume increasing 40 percent to 108,198 mt and value up 35 percent to $318.2 million.

Other first-half results for U.S. pork exports included:

-- Japan remained the leading value destination for U.S. pork, despite a 20 percent decline from last year's pace to $835.4 million. Export volume to Japan fell 13 percent to 221,776, as Japan's total imports also slowed.

-- Exports to the China/Hong Kong region fell 17 percent in volume (157,860 mt) and 22 percent in value ($330.9 million) from a year ago as the U.S. industry continues to lose market share due to lack of China-eligible supplies and the small number of plants approved to serve China. Demand for imported pork in China is on the rise due to an uptick in domestic prices and tight domestic supplies, but these opportunities are mostly being seized by European suppliers.

-- Exports to Canada held up relatively well, considering the weakness of the Canadian dollar versus the U.S. dollar. Export volume was down 6 percent to 95,443 mt while value fell 10 percent to $382.7 million.

-- Small markets performing well in the first half included the Dominican Republic (up 31 percent in volume to 13,006 mt and 11 percent in value to $29.6 million), Honduras (up 22 percent in volume to 10,119 mt and 3 percent in value to $21.7 million), Chile (up 10 percent in volume to 7,146 mt and 25 percent in value to $20.4 million), and Guatemala (7,072 mt, up 20 percent with value at $19.7 million, up 11 percent). June results were particularly impressive for Chile, as volume nearly doubled from a year ago to 1,237 mt and value was up 57 percent to $3 million.

"Our limited access to China has become a major obstacle for U.S. pork, especially with competition intensifying in so many other global markets," Seng said. "It's a situation that absolutely must be addressed in order for U.S. exports to regain momentum."

January-June pork exports accounted for 25 percent of total production and 21 percent for muscle cuts only (down from 28 percent and 24 percent, respectively, in the first half of last year). Export value averaged $50.85 per head slaughtered, down 22 percent year-over-year and 5 percent lower than in 2013.

Beef exports strong to Korea and Taiwan, but most markets lower year-over-year

Beef exports to Korea overcame a slow start in 2015, finishing the first half up 8 percent in volume (61,190 mt) and 12 percent in value ($423.7 million). June exports were the largest in more than two years at 12,622 mt (up 30 percent) valued at $81.8 million (up 17 percent).

"The Korean market could see a brief downturn in July, as economic activity slowed severely in June due to the outbreak of Middle East respiratory syndrome (MERS)," Seng cautioned. "This had a very negative effect on hotel and restaurant traffic and caused a backup in beef inventories. But consumer activity has since recovered, so the impact of MERS on exports should be short-lived."

First-half beef exports to Taiwan were up 2 percent in volume (16,506 mt) and 13 percent in value ($150.5 million). June was an especially strong month, hitting a record volume of 4,185 mt (up 32 percent from a year ago) valued at $33 million (up 13 percent).

Other first-half results for U.S. beef exports included:

Exports to Japan were down 2 percent from a year ago in both volume (109,010 mt) and value ($676.7 million) a respectable performance considering the slow start to the year (due in part to port congestion, which slowed demand for chilled beef) and the tariff advantage now enjoyed by Australian beef following implementation of the Japan-Australia Economic Partnership Agreement. U.S. beef remains subject to a 38.5 percent tariff in Japan, while import tariffs on Australian chilled and frozen beef are now 31.5 percent and 28.5 percent, respectively.

-- Exports to Mexico fell 7 percent in volume (108,112 mt) and 2 percent in value ($534.1 million) as the weakness of the peso versus the U.S. dollar has had a growing impact on beef demand in recent months.

-- The Hong Kong market began to slow near the end of 2014, and that trend continued in the first half of the year, with exports falling 18 percent in volume (59,045 mt) and 12 percent in value ($434.4 million).

-- Buoyed by strong demand in the Dominican Republic, exports to the Caribbean were up 3 percent in volume to 11,893 mt and 16 percent in value to $83.2 million.

January-June beef exports accounted for 13 percent of total production and 10 percent for muscle cuts only (down from 14 percent and 11 percent, respectively, in the first half of last year). Export value averaged $291.70 per head of fed slaughter, up 7 percent year-over-year.

Lamb exports show signs of improvement, but still sharply lower year-over-year

U.S. lamb exports endured a difficult first half but volume improved in June, increasing 9 percent from a year ago to 1,076 mt. Despite this increase, however, June export value was still down 30 percent to $1.8 million. First-half exports were down 13 percent in volume (4,755 mt) and 27 percent in value ($10.1 million) from a year ago. While lamb exports achieved promising growth in the Middle East and other emerging markets, these results were offset by sharp declines in Canada and Mexico.

Complete January-June export results are available on the USMEF statistics webpage, by clicking here.



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